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The Construction Contracts Bill 2010

Minister Brian Hayes passed the bill through the second stage of the Dáil on 3 May 2012. The bill has been passed without any amendments to the form which was introduced at first stage. The Minister has however indicated that he intends to introduce a number of committee stage amendments dealing with the following:

Thresholds

As currently drafted, the legislation only applies to private contracts in excess of €200,000 and public contracts in excess of €50,000. The Regulatory Impact Analysis identified that the majority of disputes adjudicated in the UK have a contract value of between €10,000 and €50,000. On that basis the Minister accepts that the thresholds imposed by the bill are too high. The Minister has indicated that the amendment will either reduce or remove these thresholds.

Supplies

The bill in its current form excludes all supply contracts (unless installation forms part of the contract). The Minister acknowledged that similar legislation in other jurisdictions does not exclude supply contracts. The Minister holds the view that the inclusion of all suppliers would result in an unduly onerous process which could create a barrier to entry for smaller enterprises. The Minister recognises the merit of including bespoke suppliers but is concerned that it may be difficult to define what is meant by bespoke suppliers. There does not appear to be a commitment at this stage to introduce an amendment to include suppliers.

Binding Adjudication

Section 6(12) of the bill is considered the biggest flaw in the bill. It provides that the award of the adjudicator will not be binding if referred to arbitration or other proceedings are issued. The explanation for this section (which is not contained in similar legislation in any other jurisdiction) is the need to protect the tax payer. It is recognised that as drafted, the bill favours the payer and there is a need to strike a balance between ensuring the efficient operation of the construction industry and the safeguarding of public monies. Officials from the Department of Public Expenditure and Reform are developing a number of options to strike such a balance. Presumably one of those options will be put forward as an amendment at committee stage but there is no indication at this stage of what the options being examined are.

Suspension

The bill provides that works may be suspended for a maximum of two weeks where payment has not been received by the due date. The Minister recognises that the two week period may be insufficient and will need to be amended.

Conclusion

The Minister’s comments are welcome. He has clearly undertaken to consider the major issues which have been identified by stakeholders in the industry and bring forward amendments to the legislation. There is still no mention however of the lack of a proper mechanism for enforcing the decision of the adjudicator in Ireland. As things stand, the only way of enforcing a decision is to go to the High Court or Circuit Court which is lengthy and expensive. A proper enforcement mechanism, preferably by way of a dedicated construction court list, is essential if this legislation is to achieve its stated aims of ensuring timely payment in construction contracts and introducing a mechanism for the swift resolution of disputes. There will no doubt be considerable debate on this legislation as it passes the final stages of the process and it is imperative that this issue is addressed.

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